Alibaba Group Holding Limited (BABA) on Q1 2021 Results - Earnings Call Transcript
Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's June Quarter 2020 Results Conference Call. . I would now like to turn the call over to Rob Lin, Head of Investor Relations of Alibaba Group. Please go ahead. Rob Lin: Good day, everyone, and welcome to Alibaba Group's June Quarter 2020 Results Conference Call. With us are Daniel Zhang, Chairman and CEO; Joe Tsai, Executive Vice Chairman; Maggie Wu, Chief Financial Officer. This call is also being webcast on our IR section of corporate website. A replay of the call will be available on our website later today. Daniel Zhang: Hello, everyone. Thanks for joining our earnings call today. We have delivered another strong quarter. Although the global community continues to struggle with uncertainties surrounding the pandemic, we have seen encouraging signs of recovery in China due to effective management of the outbreak in vast majority of the country. COVID-19 has accelerated digital transformation of consumer behavior and enterprise operations. Alibaba is a key beneficiary of this development with most of our businesses, including core commerce and cloud computing, have recovered and resumed healthy growth. The pandemic has fundamentally altered our macroeconomic environment and everyday life, but it has also introduced new opportunities. Maggie Wu: Thank you, Daniel. Thank you, everyone, for joining us tonight. I'd like to review our financial highlights for June quarter. We delivered a very strong start to our new fiscal year. Mobile MAUs in June was 874 million, quarterly net adds of 28 million; and annual active consumers was 742 million, quarterly net adds, 60 million. We continue to acquire new users and consumers from less-developed areas of China, reflecting our ongoing success in broadening product offerings to meet different demands. The purchase frequencies and spending of our consumers coming from less-developed areas also continue to improve. Our total revenue was RMB154 billion, up 34% year-over-year. The increase was mainly driven by the robust growth of China commerce retail and cloud computing businesses. Our domestic core commerce business has fully recovered from the COVID-19 impact and showing strong growth. Cloud computing revenue grew 59%. Our free cash flow in June quarter increased by 39% to RMB36 billion. Our strong profit growth and cash flow enables us to continue to strengthen our core business and invest for longer-term growth. Now let's move on to revenue in details. China commerce retail grew 34% year-over-year. Customer management revenue grew 23%, primarily due to increased revenue contribution from search-related revenue as well as new monetization format. This new format includes recommendation fees and things like live streaming. We see number of paying merchants and spending per merchants both increased. Commission revenue was up 17%. Commission revenue growth was primarily driven by solid 27% growth in Tmall physical goods paid GMV. The gap between the growth of commission revenue and Tmall physical goods paid GMV growth was mainly because of faster growth in FMCG and consumer electronic categories that have lower blended commission rates and also because of our initiatives to support our merchant customers, including our waiver of annual service fees for the first half of 2020. Revenue from Cainiao grew 54% year-over-year. This was primarily caused by the fast growth of our cross-border businesses such as Tmall Global, supported by increased adoption fulfilled by Cainiao services. Revenue from local consumer services was RMB7.1 billion, up 15%. This is due to an increase in average order value and ongoing recovery in on-demand delivery GMV growth. Unit economics per order for the nondemand delivery businesses was positive during the quarter, reflecting improved delivery network efficiency as well as enhanced marketing efficiency that leverage our consumer insights technology. This has led to further narrowing of losses year-over-year for the local consumer service. Our merchant acquisition continued to accelerate for this local consumer services. AliCloud continued its strong growth. So we show 59% year-on-year growth in revenue and at the same time the losses continue to be narrowed. So our average revenue per customer continued to improve, and all the cost services across are growing very well. A - Rob Lin: Hi, everyone. For today's call, you are welcome to ask questions in Chinese or English. A third-party translator will provide consecutive interpretation for the Q&A session. And our management will address your questions in the language you asked. Please note that the translation is for convenience purpose only. In the case of any discrepancy, our management statement in the original language will prevail. . Operator, please connect speaker and SI conference line now. Please start Q&A session when ready. Operator: . Your first question comes from the line of Eddie Leung from Bank of America. Eddie Leung: My question is given the existence of several large e-commerce platforms in China, in parallel, all of them already being at considerable scale, meaning that there are bound to be some consumers who are on multiple platforms simultaneously. The question is, in the future, what consumers, under what circumstances and with respect to what products, do you see specifically coming to Alibaba's platforms? Daniel Zhang: Thank you. I will answer that question. With respect to Alibaba's China retail marketplaces for consumers, what we offer is an integrated service experience with the widest and richest product assortment, with highly competitive pricing, with excellent service that's provided presale, during sale and post-sale and therefore, we're already positioned to meet the needs of all kinds of different consumers in different categories. That's why Alibaba is the number one choice for online shoppers in China, and we'll continue to keep working to keep that case. Secondly, from the merchant perspective, we have Tmall where brands make their goods available to consumers. You can buy goods, in particular, new goods directly from brands. We also have Taobao where goods are made available through many different channels to consumers, including now with direct sourcing from origin, including of agricultural and food products. So the fact is that we can meet a whole range, the full range of different needs and demands from consumers, both in terms of different categories and products and also in terms of the range. You can have some consumers who are more affluent, but they could be also looking for value-for-money offerings. But in other cases, they'll be looking for products of higher quality or of higher level of service. So our intention is to continue to provide more options and to meet needs in all of those different areas. Operator: Your next question comes from the line of Alicia Yap of Citigroup. Alicia Yap: Congrats on the solid results. My question is on your international retail business, especially Lazada. What is your latest view for the e-commerce evolvement in Southeast Asia regions? What are the differentiated approach that you have, your competitive strength? And any areas that you think there are rooms to change or improve that you foresee how the landscape will evolve as compared to China and in the region and how Lazada will position that? Daniel Zhang: Thanks, Alicia. Let me answer this question. I think, as I said in my script, Southeast Asia market is our strategic priority for Alibaba's globalization strategy. And I think when we look at our Lazada's operation, we expect to build a more tech-driven, AI-driven sustainable business. Actually, today, in this market, the competition is very extensive, and the people invest and even certifies the buyers, sellers, even shipping fees and trying to get the short-term growth. But we strongly believe we need to build a long-term, sustainable business and so our advantage is, first is about Alibaba technology infrastructure and especially our experience and know-how and technologies in the AI and in the search and recommendation and the supply and demand match mechanism. I think this is our big advantage. And after Lazada's business transformation, actually, we are today gaining the benefit from this, I mean, technology implementation. And second, I think as part of Alibaba's operation, we have a big advantage to supply the Southeast Asian market with the goods from China and from other countries. Today, actually, Lazada is not the ICD business to Alibaba. Actually, this is part of Alibaba's global network, and we are trying to sell not only from local to local but also China to Southeast Asia and other countries to Southeast Asia. And at the end of the day, I think we are trying to build a global network and to sell anywhere, buy anywhere. And the third one, I think, today, for Lazada, we also have different segments, and we have our large mall for brands operation which provide high-quality product directly from brands and with good fulfillment delivery services. We have our Lazada marketplace, which is more like a small B2C or even C2C. And as I said before, we have like large global, which is a cross-border business from China and other countries. We will continue to invest and enhance the position of each of the marketplaces and provide an integrated experience to our customers. And as to the difference, I mean, between China market and our Southeast Asia market, I would say I think maybe the biggest difference is that, actually, in Southeast Asia, social network is very popular. And there are a couple of very important players in this market. And the merchants also loves to interact with customers of our social network. So how to leverage the power of social networks, I think it's a very important goal to us. So actually, we have done a lot, and we will continue to do further. Thank you. Operator: Your next question comes from the line of Binnie Wong of HSBC. Binnie Wong: Congrats on a very successful quarter and also on a successful June 18 Shopping Festival. Question is on the Taobao Deals. We saw on news that you soon launched short video channels to strengthen the ecosystem. And while Douyin, on the other side, also talking about expanding e-commerce business, making it close loop. So question is, how do we differentiate when we talk about this live streaming and short video, I guess, in the terms of like social commerce? And how do we better help merchants to sustain the relationship longer with customers? And so far, do you see live streaming as cannibalized or incremental to merchants marketing particularly on Alibaba? Daniel Zhang: Okay. I think, first of all, Taobao Deals targets value-conscious customers by offering high-quality products. High-quality and value-for-money products. So I think the target customers for Taobao Deals actually is very, very clear. And as part of the consumer experience in Taobao Deal mobile app, we launched the short live streaming and short-form video. I think -- but this is not a compete -- I mean, user experience is part of the consumer interface, but I think we are trying to give factories and suppliers a tool to manage their customers and also trying to give customers different experiences in their consumer journey on Taobao Deal. But I think the primary goal is still segment the Taobao Deal with the value-for-money products and the low-end customers. This is very clear. And the short-form video is just a consumer feature. And this will highly integrated with the whole entire consumer journey in Taobao Deal mobile app. And in terms of the live streaming, I mean, activities in other player, including Douyin, I would say, actually, for our merchants, I think live streaming is more like an event marketing and actually in there as part of their entire operation. And people can -- it's impossible for people to do seven day, 24 hours live streaming and all the ways. And if you look at the details of live streaming today, actually, most of the merchants viewed it as a way to do promotion and acquire new customers. But they do need a sustainable and day-to-day operation platform, which is Alibaba platform. So that's why a lot of merchants, they build their store from our platform, and they operate -- they're trying to bring all the consumers, customers from different, I mean, ways to Taobao and because this gives them a best way to operate, and this also gives them a highest ROI in their operation. And for Taobao live streaming, I think we also introduced live streaming in Taobao and Taobao Deal. And as we disclosed, the GMV from Taobao live streaming tripled, I mean, in this quarter. I think this already is a very important, I mean, consumer feature. But that's not all. That's part of consumer experiences. And because of the incremental traffic generated from the Taobao live streaming, we're also identifying new opportunities for monetizing this, I mean, additional traffic in Taobao live streaming, but once again, this monetization model is not a separate one. It's part of the whole solution, our entire solution we provide to our merchants to manage their customers on our platform for their entire life cycle. Operator: Our next question comes from Mark Mahini . Unidentified Analyst: I just wanted to ask about the AliCloud business. Can you talk about the sustainability of growth there? Are there particular industry verticals that you've recently seen be more aggressive in terms of cloud deployments? And just talk about what's happening in terms of the competitive dynamics, whether pricing remains relatively consistent, you're seeing more aggressive pricing in the industry. Daniel Zhang: Cloud is a fast-growing business. If you look at our revenue breakdown, obviously, cloud is enjoying a very, very fast growth. And what we see is that all the industries are in the process of digital transformation. And cloud is a very important -- I mean, moving to the cloud is a very important step for the industries. And we still believe that sooner or later, all the business will move to cloud. So that's why we do see the fast-growing -- we do believe the fast-growing will continue in near and midterm. And even in the longer term, this will totally change how enterprises work and how business collaborated. And in terms of the industry development, even all the industries, they are embracing the cloud. But I think that the people who take the first move part, first, is from the Internet company because all the Internet company, all the Internet operation actually could be powered by cloud. So Internet is a very, very important sector. But in recent months, we do see the fast growth from other sectors, including like financial services, like consumer retail and even like public sectors, like power and utilities, so on and so forth, but we do believe it is still in an early stage. And as I said before, we don't want to just provide cloud in terms of infra services. If we just do it as an infra service, as SaaS services, then price competition is inevitable, and then all the cloud service is more like a commodity business. Today, Alibaba's cloud is cloud plus intelligence services. And it's about cloud plus the power of the data usage. So that's why we work hard to develop industry-specific solutions with PaaS and PaaS services together with our SaaS partners, and we will continue to do that to enhance our market leadership. Maggie Wu: Yes. Mark , this is Maggie. To supplement what Daniel said towards -- regarding your question on the competition and cloud computing, our peer company who also has cost businesses, they report their results as well. And I think you can do the comparison, although none of these companies have disclosed the car computing revenue and profitability, the EBITDA like we do, but you still can figure out from -- derive the cost revenue from them. Obviously, we're the largest in terms of the business size. So we recorded more than RMB12 billion revenue in one quarter's time. This is more than double of our nearest competitor, and we're growing faster. Just give you a sense of the... Joe Tsai: I would also like to add that if you look at -- if you compare -- to give you a global comparison of the China cloud market and the U.S. cloud market, based on the third-party studies that we've seen, the China cloud market is going to be somewhere in the $15 billion to $20 billion total size range, and the U.S. market is about 8x that. So the China market is still at a very early stage. And we expect, based on what we've seen of our customers, as well as observing the whole market growth, the China market is going to be a much faster-growing market in cloud than the U.S. market. So we feel very good, very comfortable to be in the China market and just being an environment of faster digitization and faster growth of usage of cloud from enterprises because we're growing from such a smaller base, about 1/8 the base of that of the U.S. market. Operator: Your next question comes from Youssef Squali from Truist. Youssef Squali: Two very quick ones. First, it seems like the recovery have been somewhat uneven between higher-income and lower-income consumers. Daniel, I was just wondering if you believe that as a result of this pandemic, there has been a structural impact on lower-income consumers. And maybe how long it may take them to recover over time? And second, Maggie, any update to the guidance that you had given the last call about the total revenue in fiscal 2021 of more than RMB650 billion? Maggie Wu: Maybe I'll answer first to say on this revenue guidance, Youssef. So we grow revenue during the quarter by 34%. We remain the guidance unchanged, although we're very confident about our business because this is just the first quarter of this fiscal year and there are still three more quarters to go. So we'll update you at due course if there is any update. Thank you. Daniel Zhang: For the consumer segment, I think, generally speaking, the recovery of Chinese consumption, I think actually stays strong. As China is the first country who, I mean, moved out of the pandemic and all the situation is almost under control, except for a couple of cities, so that's why the recovery of the consumption, I think, is quite promising. And if you look at our number and our China retail market business reported a very strong growth in this quarter. Most important thing is that the ASP for the consumers in all city tiers actually grew, and they buy more frequently, and they consume more. But if you look further, I agree that for the low-income people, I think they are -- if you look at their consumption behavior, actually, there are still some uncertainties because of the -- because they are actually more cautious about the future of the economy. As you know that in China, a lot of low-income people from the service sectors. And today, I think as compared to the physical goods consumption, the consumption service sector still takes some time to fully recover, and the employment in this, I mean, service sector also need more time to recover. So I think this will bring some sort of like uncertainties, I mean, for the low-income group. Operator: Your next question comes from the line of Gregory Zhao of Barclays. Gregory Zhao: Congratulations on a strong quarter. So we know that China has produced a number of globally leading Internet science with Alibaba as the most typical example. And these companies, including Alibaba, are at the front of the entire world in terms of developing all kinds of applications for the Internet. But when it comes to things like operating systems or even semiconductors and chips, China lags behind the rest of the world. So my question is, does Alibaba have any longer-term plans to invest in that kind of key infrastructure? And as part of that, does Alibaba have plans to hire more talent from international markets? Daniel Zhang: Thank you. Alibaba has always been committed to market-oriented and user-oriented development, and we continue to invest for the long term in technology with those objectives in mind. We believe that all technology must be tightly integrated with the market to meet needs in the market. We've done that with consumer-facing technology and now also with the cloud where we're not just providing infrastructure but are looking for ways to leverage on the cloud to help businesses enhance their operations and become more effective. So certainly, this is our commitment. We're committed to long-term investment and to doing research through our DAMO Academy, among others. But we do believe very strongly that research and development should be highly integrated in order to create value for society. Operator: Your next question comes from the line of Jin Yoon from New Street Research. Jin Yoon: Maggie, I think on your prepared remarks, you talked about reinvestments back into the business, the profits reinvestment back into the business. Can you just kind of talk about the scale and scope of kind of what that investments look like in the duration? And how we should be thinking about the rest of the fiscal year in terms of when some of these investments will hit? Maggie Wu: Sure. Jin, let me answer your questions. First of all, as you can tell that we have very strong profit generation power, right? So if you look at the adjusted EBITDA for this 1 quarter, we have generated over RMB50 billion of profit. So we use that part of that profit to reinvest back to development business. While other people use investors' money to invest that. So that's number one. Number two, in terms of to what extent, I think we got a lot of questions on you're talking about cost control, efficiency, does that mean that you are very cautious in terms of the investing in marketing, in user acquisition, et cetera? The answer is not necessarily. We are very committed to further extend not only the user base but also enhance the user engagement. But also, they're on increase the business of these users and provide with broader products and services. So when you look at the sales and marketing costs, we're investing over like CNY13 billion sales and marketing at one point of time. It's not a small number. However, as... Rob Lin: Operator, could you please take the next question? Operator, can you hear us? Maggie Wu: This is Maggie. Maybe let me summarize what I just answered on the same question. So with the strong revenue and profit growth, we're going to continue to reinvest back to these strategically important businesses. So I think our investment aims to, for a longer term, healthy and sustainable growth. Operator: Your next question comes from Colin Sebastian from Baird. Colin Sebastian: Congratulations on the quarter. Two quick ones from me as well. First off, Daniel, I think you mentioned the change in strategy in India. If maybe you could talk in a little more detail about the platform's opportunities in that market. And then secondly, looking at the gap between the mobile MAUs and the total active commerce user base, the gap has increased a bit. And I'm wondering if that's an opportunity over time to engage those mobile monthly users that are not yet active customers. Daniel Zhang: First of all, understand, we decided to stop operations of UCWeb and other innovation initiatives in India after our business review. And we believe that globalization is our long-term strategy. But in near term, I think we are closely monitoring the change of the geopolitical environment and also the national policy of other countries, and we will adjust our strategies, I mean, according to this change. For the second question, I would say, today, our MAU and AAC still have a very strong growth, given we have such a huge size of consumer base in China, but I think most important thing is that we have people engaged with us. That's the starting point. And if you look at our historical number, you will see that the longer people stay with us, the more spending they will do and the more consumption they will do and the more categories they will consume. So we will continue to engage with customers and to convert the visitors, the new customers into our royalty buyers in the long run. Operator: Your last question comes from Piyush Mubayi from Goldman Sachs. Piyush Mubayi: Congratulations on a good set of numbers. May I just take a step back and look at COVID and the aftermath of COVID? I wanted to understand from you if there were specific areas that you saw an increased opportunity emerge. And would that lead to a change in tactic? We did notice that your 6.18 period, you were much more aggressive, and it bore fruit very, very quickly for you and we wanted to understand if those two can be read together and we can see an emergence of potentially a much more aggressive stance from you that would bear fruit over time. That's my question. Daniel Zhang: Well, I think this pandemic changed fundamentally people's lifestyle and changed how enterprises work. And if you look at the consumption sector, I would say, after the pandemic, people care more about the health, and that's why we see the health care categories grow very fast, but I think that's not all, and we do see a lot of increasing opportunities in FMCGs, in new brands and also in many sectors. Also from the retail perspective, I think all the retail operations moving to the digital sector -- I mean, move to digital operation. So how to leverage the power of our new retail infrastructure to help this merchant to serve their customers on a local basis. I think this is a growing opportunity. And the cloud, we said many times, and cloud is a big wave, and we are still in the early stage in terms of the fast growing. And I think 6.18 is as a midyear campaign is part of our annual -- I mean, annual operation. And we think that we take the right approach and to meet the demand and emerging demand of the consumers, I think, post pandemic and also meet the demand of the suppliers who want to sell more products and deliver more services to their customers. So we are happy to see the good results, and we will continue to create value for both our customers and the merchants. Maggie Wu: Yes. As you observed that during this June 18 Shopping Festival, we, together with the local government and together with our partners, has invested billions of R&D in consumer coupon subsidies to stimulate domestic consumption. And you asked us whether we're going to continue the aggressive investment. I would say, I think I would put it in this way, we'll be aggressively invest into the business to expand our market leadership. At the same time, we also want to invest aggressive and smartly. Smartly means that we're aiming in long-term sustainable growth rather than just temporarily acquire customers and GMVs. So the investment is going to be focused on user-based growth, also engagement, also retention. Also by saying smart, it also means that we're going to leverage the resources from the whole Alibaba economy, which includes us and together to grow our business. Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines.
Alibaba Shares Drop 5% Following Earnings
Alibaba (NYSE:BABA) released its financial results for the first quarter ending March 31, 2024, showing earnings that did not meet analyst expectations. As a result, shares fell nearly 5% pre-market today.
The Chinese e-commerce leader reported an adjusted earnings per share (EPS) of RMB10.14 (US$1.40), slightly below the anticipated RMB10.27. Despite the earnings shortfall, Alibaba's revenue increased by 7% to RMB221.87 billion (US$30,729 million), which was just above the expected RMB220.32 billion.
CEO Eddie Wu explained the quarter’s performance with a focus on enhancing customer experience and expanding the company's commerce operations both in China and internationally.
The modest revenue growth, described by CFO Toby Xu as a sign of returning growth, contrasted with a significant 96% year-over-year decline in net income. This decrease was largely due to a net loss from investments in publicly traded companies, a stark reversal from the net gain reported in the same quarter the previous year.
Alibaba Group Holdings: The Undervalued Gem in China's Market
Alibaba Group Holdings: A Key Undervalued Stock in the Chinese Market
In the recent analysis by InvestorPlace, Alibaba Group Holdings (NYSE:BABA) was spotlighted as a key undervalued stock in the Chinese market, a perspective that gains traction when considering the company's financial achievements and strategic initiatives amidst the economic challenges posed by government regulations and property pricing issues in the post-COVID-19 era. Alibaba, with its diverse range of services spanning e-commerce, media, entertainment, and cloud computing, has demonstrated remarkable financial resilience and growth potential, making it a standout candidate for investors eyeing opportunities in the Chinese market.
For fiscal 2024, Alibaba reported a revenue of approximately $62.9 billion, marking an 11% increase from the previous year. This growth is significant, reflecting the company's ability to expand its business and increase sales despite the economic challenges. Furthermore, Alibaba's free cash flow, a critical indicator of financial health and the company's ability to invest in future growth, surged by 46% year-over-year to about $11.6 billion. This substantial increase in free cash flow highlights Alibaba's strong operational efficiency and its capacity to generate cash from its operations.
Despite these strong financial indicators, Alibaba's stock price experienced a downturn, closing at approximately $79.10, a decline of about 3.01% from its previous close. This decline in stock price, coupled with a price-to-earnings (P/E) ratio of 17.3, suggests that Alibaba's stock may indeed be undervalued. The P/E ratio, which compares a company's stock price to its earnings per share, is a widely used metric to gauge a stock's valuation. A P/E ratio of 17.3, in the context of Alibaba's financial performance and growth prospects, indicates that the stock might be priced lower than its actual worth.
Moreover, Alibaba's strategic investment of $1 billion in its partners to enhance the ecosystem of its emerging cloud platform is a testament to the company's forward-looking approach and commitment to securing its future growth. This investment not only strengthens Alibaba's position in the cloud computing sector but also signals its intention to diversify and solidify its revenue streams further.
While the broader economic and regulatory environment in China presents challenges, Alibaba's robust financial performance, strategic investments, and the current valuation of its stock present a compelling case for investors. The company's ability to navigate through economic uncertainties, coupled with its strong growth potential, makes Alibaba an attractive investment option for those looking to capitalize on opportunities within the Chinese market.
Alibaba's Bold $4.8 Billion Share Buyback Strategy in 2024
Alibaba's Aggressive Share Buyback Strategy
Alibaba (BABA:NYSE), the Chinese e-commerce behemoth, has made headlines with its aggressive share buyback strategy, spending a whopping $4.8 billion in the first quarter of 2024 alone. This move, as reported by the Wall Street Journal on April 3, 2024, is a clear indicator of Alibaba's strong belief in its financial stability and optimistic outlook for the future. The decision to execute its second highest quarterly buyback on record is not just a financial maneuver but a bold statement of confidence to its investors and the market at large.
The rationale behind such a significant buyback can be better understood by looking at Alibaba's recent financial performance. The company has reported a notable revenue growth of 15.82% for the quarter, a figure that underscores its ability to generate sales and expand its market presence. More impressively, Alibaba's gross profit growth surged by 22.33%, indicating not only increased sales but also improved efficiency in managing its cost of goods sold, thereby enhancing its profitability margin.
However, it's important to note that Alibaba's financial journey isn't devoid of challenges. The company faced a steep decline in net income growth, which plummeted by 47.73%. This drop, alongside a 32.97% decrease in operating income growth, signals potential pressures on the company's earnings, possibly due to increased operational costs or other financial headwinds. Despite these hurdles, Alibaba's strategic focus on long-term growth is evident in its slight asset growth of 0.52% and a robust free cash flow growth of 31.45%, the latter being a critical indicator of the company's ability to generate cash from its operations.
The mixed financial performance, characterized by strong revenue and gross profit growth against the backdrop of declining net and operating income, paints a complex picture. Yet, Alibaba's decision to proceed with a significant share buyback reflects its management's belief in the company's intrinsic value and future growth potential. By reducing the number of shares outstanding, Alibaba not only aims to increase shareholder value but also sends a strong signal of confidence in its financial health and strategic direction. This move, coupled with the company's ability to maintain a healthy cash flow, positions Alibaba favorably in the eyes of investors, despite the challenges it faces.
Alibaba Misses Q4 Results, Announces $25B Buyback Expansion
Alibaba (NYSE:BABA) disclosed its financial results for the quarter ending December 31, revealing earnings per share (EPS) of RMB18.97, below the anticipated RMB19.17. The company's revenue was RMB260.35 billion, narrowly missing the expected RMB260.65 billion. Following the announcement, shares fell by more than 5% in pre-market trading.
The group's Taobao and Tmall platforms reported a 32% quarter-over-quarter revenue rise to 129.07 billion yuan, though this was below the forecasted 133.33 billion yuan.
Meanwhile, Alibaba's International Digital Commerce Group saw its revenue jump by 16% quarter-over-quarter to 28.52 billion yuan, surpassing the expected 27.2 billion yuan.
To boost shareholder value, Alibaba declared a significant $25 billion expansion of its share repurchase program.
Alibaba Downgraded at Bernstein
Bernstein analysts downgraded Alibaba (NYSE:BABA) stock despite its "very cheap" valuation. They shifted from an Outperform rating to a Market Perform rating and reduced their price target by $32 to $98 per share.
The decision to downgrade Alibaba was based on the belief that the stock had already factored in sustained low growth and that the reopening of the economy would contribute to improved growth through a better category mix. However, the stock has been trading within a range since then, and while it remains undervalued, the previously assumed scenario of perpetual low growth is no longer considered an aggressive bear case, according to Bernstein’s note.
The analysts also highlight the risk of a "value trap," as quarterly comps are expected to become more challenging going forward. Furthermore, the note suggests that Alibaba's challenges extend beyond a lack of user traffic. There are concerns regarding merchant crowding, which drives up search costs and puts pressure on merchant return on investment (ROI).
Alibaba Downgraded at Bernstein
Bernstein analysts downgraded Alibaba (NYSE:BABA) stock despite its "very cheap" valuation. They shifted from an Outperform rating to a Market Perform rating and reduced their price target by $32 to $98 per share.
The decision to downgrade Alibaba was based on the belief that the stock had already factored in sustained low growth and that the reopening of the economy would contribute to improved growth through a better category mix. However, the stock has been trading within a range since then, and while it remains undervalued, the previously assumed scenario of perpetual low growth is no longer considered an aggressive bear case, according to Bernstein’s note.
The analysts also highlight the risk of a "value trap," as quarterly comps are expected to become more challenging going forward. Furthermore, the note suggests that Alibaba's challenges extend beyond a lack of user traffic. There are concerns regarding merchant crowding, which drives up search costs and puts pressure on merchant return on investment (ROI).
Alibaba Shares Surge on a Split Plan into 6 Units
Alibaba (NYSE:BABA) shares surged over 14% on Tuesday following a Bloomberg News report that the company is planning to divide its business into six new units to boost its declining share price. Each unit may pursue independent fundraising and initial public offerings (IPOs) when the timing is appropriate, as per CEO Daniel Zhang.
While e-commerce remains the core business, Alibaba has made significant strides in cloud and media. Zhang will head the cloud intelligence division, highlighting the significance of cloud and AI. Jiang Fan is expected to lead the digital business unit, and Trudy Dai will likely head the Taobao Tmall online shopping division.
Since founder Jack Ma criticized regulators and banks in China in a speech in November 2020, shares in Alibaba have plummeted by over 70%. Additionally, a planned $37 billion initial public offering for Ant Financial, an affiliate of Alibaba that operates Alipay, the world's largest mobile payment platform, was canceled due to Ma's comments. As a result of the controversy, Chinese officials initiated a wider crackdown on the country's most influential tech firms. Although Ma has largely remained outside of China since then, he recently visited a school in his hometown of Hangzhou, where Alibaba's headquarters are located.
